Working hard and focusing on the right career path brings you to a point where you get a sufficient annual income to support both yourself and your family. However, once you have reached this point, you shouldn’t stop and simply keep on spending your money without getting some benefits in return. Having a stable to profitable financial situation means that it is time to start making investments. This will require you to spend more money at first, but then, in time, you will get a return on your investment and start making passive income. There are many smart ideas that you choose from, but investing in property is one of the options that almost never fails.
Commercial property is more profitable than residential property
Depending on the type of building you buy, you can either rent it to an individual or family to live there (residential) or you can rent it to one or more companies (commercial). Although there are some variations from region to region, investing in commercial property is seen by experts as being the more profitable option. Office space can be rented out at a higher price, is more competitive, more in demand and the same building can be rented to more companies, whereas a residential one is usually smaller.
Exchange the property if needed
If you feel that the property you currently hold is no longer right for your needs, but fear that selling is a much too complicated process, then you should consider 1031exchange. This means that you can exchange your property with another one, as long as the two are similar in value. This is a simpler way of pivoting, without putting your finances are risk and having to buy new property all over again. For example, you can exchange commercial properties within the same city or you can exchange residential property with commercial one. Alternatively, you may also exchange several smaller properties with one larger one, or vice-versa. It all depends on what your current goals are and the way your investment performs compared to your initial plans.
Look for tax shelters
Paying taxes is never an enjoyable process and no property owners loves seeing how a considerable percentage of the money they worked for goes to the state. Fortunately, there are some legal ways to defer taxes, so called tax shelters. The aforementioned 1031 exchange is one of them, but not the only one. Depending on the region, certain activities, transactions and collaborations are also exempt from paying taxes or they pay much less. To make sure you are aware of all the tax shelters you could benefit from, make sure you contact a professional accountant. Not only will you find out exactly what you qualify for, but also deal with the process in the most legal way possible. Some paperwork will obviously be involved and it’s always a good idea to get some extra help instead of doing everything yourself.